2CoX 





Class. 
Book. 






DEPARTMENT OF JUSTICE 

WASHINGTON, D. C. 



COMPILATION OF AUTHORITIES ON 
AND DISCUSSION OF 

WAR CONTRACTS 

AND THE RELATION OF THE 
CITIZEN TO THE GOVERNMENT 



By 



RALPH E. MOODY 

Special Assistant to the Attorney General 




WASHINGTON 

GOVERNMENT PRINTING OFFICE 

1922 



J AN 



COMPILATION OF AUTHORITIES ON AND DISCUSSION 
OF WAR CONTRACTS AND THE RELATION OF THE 
CITIZEN TO THE GOVERNMENT. 



Department of Justice, 
War Transaction Section, 
Washington, D. C, November 27, 1922. 
To the Honorahle the Attorney General and the Advisory 
Council, War Transaction Section, Department of 
Justice: 
111 compliance with your request, I have the honor 
to herewith submit some ideas and thoughts to be 
taken into consideration in the construction of con- 
tracts made during the war on behalf of the Gov- 
ernment. 

In order to determine the rights of the Govern- 
ment growing out of these contractual transactions 
it is necessary to consider questions fundamental 
in their nature and character. The consideration 
of these questions are essential in order to acquire a 
true and right conception of the meaning and pur- 
pose of a government, the rights and duties of citi- 
zenship, and the relation one bears to the other. 
A true understanding of these fundamental prin- 
ciples makes easy of solution all questions arising 
under, by, or through any of the war contracts. 
Complexity finds its simple solvent and confusion 
its order in the light of the knowledge of right 
fundamentals. All difficulty has as its only basis 

23189—22 1 (1) 



2 

ignorance or forgetfulness of the true principle ap- 
plicaljle to the discordant condition. The situation 
becomes immediately clear when the true principle 
fe found and applied. ''Follow principle and the 
knot unties itself," said Thomas Jefferson. 

Inherent in man is the desire to actually experience 
a government that always presently protects and pro- 
motes the happiness and prosperity of all mankind. 

The Ignited States Government has nearest reached 
the ideal, and enjoys the admiration of the world's 
best thought. Our governmental tree is rooted in 
the hearts of its people; the heart has its true desire 
planted and embedded in spiritual soil, nurtured and 
maintained alone by the omnipresent spring of 
brotherly lo\^e. We must not forget that the seeking 
of governmental life-giving sustenance from any other 
source impairs and retards the tree's perfect de\'elop- 
ment, and if mistaken seeking is long pursued and 
much indulged, the wrong will be made manifest in 
the tree's decadence. 

Our Government, the immortal Lincoln said, is a 
''government of the people, by the people, and for 
the people." 

Chief Justice Marshall in McCidloch v. Maryland, 
4 Wheat. 316, pages 404-405, says: 

The Government of the union is emphatic- 
ally and truly a government of the people; 
in form and in substance it eminates from 
them. Its powers are granted by them and 
are to be exercised directly on them, and for 
their benefit. 



"Its 'great powers/ the profound jurist in this 
case observed, on page 406, were ' to lay and collect 
taxes; to borrow money; to regulate commerce; to 
declare and conduct a war; and to raise and support 
armies and navies, the sword and the purse, all the 
external relations and no inconsiderable portion of 
the industry of the Nation, are intrusted to its 
Government'"; and again, on page 113, he says: 

It must have been the intention of those 
• who gave these powers to insure, so far as 
human prudence could insure, their henejlcial 
execution. 

Chief Justice Waite, in Minor v. Happersetl, 21 
Wall. 162, at page 165, said: 

The very idea of a political community 
such as a nation is, implies an association of 
persons for the promotion of their general 
welfare. Each one of these persons associated 
becomes a member of the nation formed by 
the association. 

The Constitution of the United States is 
not merely a league of sovereign States for 
their common defense against external and 
internal violence, but a supreme Federal 
Government, acting not only upon sovereign 
members of the Union, but directly upon all 
its citizens in their individual and corporate 
capacities. It was established, the Constitu- 
tion expressly declares, by '' the people of the 
. United States, in order to form a more peifect 
union, establish justice, insure domestic tran- 
quill ity, provide for the common defense, pro- 
mote the general welfare, and secure the blessings 



of liberty to them and their posterity.''^ This 
Constitution, and the laws made in pur- 
suance thereof, and the treaties made under 
the authority of the United States, are de- 
clared to be the supreme law of the land. 
Thomas v. Kahler, 42 Miss. 651. 

A State is a body politic, or society of men 
united together to promote their safety and 
advantage by means of their union; who are 
guided and directed by the public political 
authority — the Government. Government is 
the ligament that holds the political society 
together, and when that is destroyed the 
society as a political body is dissolved. 
Vattell, 59. 

The Government is a social compact by 
which the whole people covenant with each 
citizen and each citizen with the whole people 
that they shall be governed by certain laws 
to be enacted for their public good. The 
terms of this compact are defined by the 
Constitution. Kansas City v. Holmes, 274 
Mo. 159. 

The people are sovereign, and speak through 
their Constitution, and when they thus speak 
its mandates are binding upon all of the people; 
the Government is a fictitious entity created 
by the people; a corporate entity, and through 
which the people act; all departments of 
government and officers are only instrumentali- 
ties through which the Government acts. 
They are in a sense the agents through which 
the Government acts, and all the power and 
authority to act, and the manner of acting are 
controlled bv the fundamental law found in 



the Constitution. Taft v. Auburn, 185 Iowa. 
1069, 1073. 

And further, the last-mentioned court, in the course 
of its opinion in the above case, said : 

That the provisions of the Constitution an 
mandatory, and their mandates bind as closely 
and as firmly the different branches and 
departments of government as they do the 
citizens of the Government. 

Chief Justice Taney, in Charles River Bridge v. 
Warren Bridge, 11 Pet. 409, at pages 547 and 548 said : 

The object and end of all government is to 
promote the happiness and prosperity of tht 
community by which it is established; and it 
can never be assumed that the Government 
intended to diminish its power of accomplish- 
ing the end for which it was created, h^ ^^ ^ 

While the rights of private property are 
sacredly guarded, we must not forget that the 
community also have rights, and that the 
happiness and well-being of their citizens 
depends upon their faithful preservation. 

A government does not exist in a personal 
sense or as an entity in any primary sense for 
the purpose of acquiring, protecting, and en- 
joying property. It exists primarily for the 
protection of the people in their individual 
rights, and holds property not primarily for 
the enjoyment of property but as an incident 
to the purpose for which it exists — that of 
serving the people and protecting them in their 
rights. Curiey v. U. S., 130 Fed. 1, 8. 

The Government was not organized for the 
purpose of taxation, but taxation may be 



necessary for the purposes of the Government. 
Stone V. Mississippi, 101 U. S. 814, 820. 

The Government of the United States was 
erected by the free voice and joint will of the 
people of America for their common defense 
and general welfare. Its powers apply to 
those great interests which relate to this 
coimtry in its national capacity, and which 
depend for their stability and protection on 
the consolidation of the Union. It is clothed 
with the principal attributes of political sover- 
eignty, and it has justly been the guardian of 
our best rights, the source of our highest civil 
and political duties, and the sure means of 
national greatness. 1 Kent Comm. 201. 

The Constitution must be looked at in the 
light of the end it was designed to accomplish, 
having in view the evils it was intended to 
remed}^ and the benefit it was to exert. We 
must examine it in the light of the fact that 
we were an absolving people which it was 
designed anew to bind together in a relation 
which should continue forever. * ^h ^i^ The 
time has come when the Constitution and the 
laws of the United States are not the mere 
theoretical objects of the thought of the states- 
man, the law3^er, or man of affairs, for the 
operation of its Government, but now reach 
to the recesses of every human business and 
force themselves upon ever}^ man of thought. 
Justice Miller, in his lecture on the Constitu- 
tion. 

The Secretary of State, Mr. Hughes, in an address 
before the American Bar Association, Volume XLII, 
1917, at page 239, said: 



In equipping the National Government with 
the need of authority in war, they (the framers 
of the Constitution) tolerated no Hmitations 
inconsistent with that object, as they reahzed 
that the very existence of the Nation might be 
at stake, and that every resource of the people 
must be at command. 

In the famous case of Dred Scott v, Sandforcl, 19 
How\ 393, it was said that the words ''people of the 
United States'' and ''citizens" are synonymous 
terms; that they "describe the political body which, 
according to our republican institutions, forms the 
sovereignty which holds the power and conducts the 
Government through its representatives.'' 

It necessarily follows, in view of the foregoing 
considerations, that we have a Government created 
by the people for the impartial, individual, and col- 
lective benefit and protection of all the people, and 
the people have granted unto this Government so 
formed the necessary powers to properly execute its 
high purpose. 

The question then arises what is the duty to such 
Government by its people whether acting only in the 
capacity of a citizen or with the added duties of an 
official? The question answers itself in the honesty 
of thought; it is the duty of allegiance, faithfulness 
and fidelity to the trust thus created and imposed. 

Allegiance antedates any written law; allegiance is 
a duty by the law of nature. 

The legeance or faith of the subject is due 
unto the King, by the law of nature; secondly. 



8 

that the law of nature is a part of the law of 
England; thirdly, that the law of nature was 
before any judicial or municipal law; fourthly, 
that the law of nature is immutable. 

The law of nature is that which God at the 
time of creation of the nature of man infused 
into his heart, for his preservation and direc- 
tion; and this is lex aeterna, the moral law, 
called also the law of nature. And by this law, 
written with the finger of God in the heart of 
man, were the people of God a long time 
go^'erned, before the law was written b}' 
Moses, who was the first reporter or writer of 
the law in the world. Lord Coke in Calvin's 
case, 2 E. R. C. 575. 

x\llegiance is defined in no imcertain terms by 
writers on constitutional subjects and in judicial 
opinions. 

Justice ]\riller in his lectures on the Constitution 
(Miller, Constitution of the United States), at pages 
276, 293, 294, and 297, says: 

There are certain rights, privileges, and duties 
belonging to a citizen of a State, which do not 
belong to a foreigner resident within the 
State. Among these it is said that allegiance 
and protection are correlative ol)ligations. If 
you are a citizen ^ ^' ^ then, ^ ^' "^^ 
there are the correlati\'e obligations l)etween 
yourself on the one side, and the Government 
"^ * "^ on the other. The citizen or subject 
owes allegiance, which signifies a loyal devotion 
and support due from him to the government 
under which he lives; and, in return, that 
goxernment owes him protection in a great 



many ways, too numerous for me to undertake 
to detail at this time (p. 276). 

The court (the Supreme Court, in the Slaugh- 
terhouse cases), ^ * ^' in an opinion which 
I had the honor to deliver, ^' * -^ held 

* * "^ that the State in its relation to its 
citizens, and the citizens in their relation to 
the State, were interchangeably bound with 
regard to those laws which go to make up the 
rights which are protected by law; the right of 
marriage; the right of the descent of property; 
the right to the control of children ; the right to 
sue for property, and to have it protected ; and, 
in general, the protection of life, liberty, and the 
pursuit of happiness — these were all founded in 
the relation between the State and its citizens. 

He has a right to look to that Government 

* * * for protection in all foreign countries 
wherever he might travel, on the high seas or 
the sands of Africa, in Europe, or in Australia, 
wherever a ship floats or a traveller can go. 
He has a right to call on the United States for 
protection wherever he may be outside of its 
lines or territory. He has also the right to 
travel all over this country free from any tax, 
assessment, or interruption in his passage from 
one part of the country to another. He has 
the right of petition granted to him by the 
Constitution of the United States. He has the 
right to use the mails of the United States; 
he has, in short, a right to everything which 
that great Government gives or concedes to 
anybody, and these are his rights as a citizen 
of the United States. They are numerous; 
they are great; they are valuable. So it may 

231S9-22 2 



10 

also l)e said of his rights as a citizen of a State; 
they are numerous; they are great; they are 
important. The one affects one class of rela- 
tions, and the other affects another class. The 
citizen owes an allegiance to the United States, 
and he owes an allegiance to his State. He is 
bound to obey the laws of his State, and he 
is bound to refrain from all criminal practices 
denounced by those laws. He is bound to pay 
his taxes to support the government of the 
State, and he is bound as well to pay the taxes 
due from him to the United States; to fight 
for that Goverrnnent, if called upon, or to fight 
for his State, and even to gi\'e his life, if need 
be, for his citizenship of the United States. 
He is l)0und to be governed by the United 
States in all of his relations with foreign States. 
If he wishes to travel in a foreign State, and 
desires protection, the United States will gi\'e 
him a passport, which a State is not permitted 
to do. If he icants to take part in the admin- 
istration of the Govermnent of the United States, 
either as an officer, Member of Congress, con- 
tractor or builder; if he wants his river im- 
proved, if he wants the postal railway ex- 
tended, if he wants a new post office, or any 
one of a thousand such things, he must go to 
the Federal Government. It is the business 
of a lifetime to define the relations of a man 
to that Government, or his relations to the 
State in which he belongs; but they all grow 
out of and constitute this doctrine of allegiance 
and protection. He owes his allegiance, first, 
to the Gorernment of the United States, be- 
cause he is first of all a citizen of that Gov- 



11 

ernment; second, to his State, because he be- 
comes a citizen of that State, after being a 
citizen of the United States, by his residence 
(p. 295). 

Allegiance is a debt due from the subject 
upon an implied contract with the Prince, that 
so long as the one affords protection so long 
will the other demean himself faithfully. 
Jackson v. Goodell, 20 Johns (N. Y.) 188. 

Allegiance is indeed due from every citizen 
to the State, but it is a political obligation and 
is binding on him who enjoys the protection 
of the Commonwealth. The truth is that this 
obligation which is reciprocal to the right of 
protection, results out of the political relations 
between the Government and the citizen. 
Wallace v. Hormstadt, 44 Pa. St. 492-501. 

Allegiance is the duty which is due from 
every citizen to the State, a political duty bind- 
ing on him who enjoys the protection of the' 
Commonwealth to render service and fealty to 
the Federal Government the obligation of 
fidelity and obedience which the individual 
owes to the Government or to the Sovereign, 
under which he lives in return for the protec- 
tion he received — that duty which is recip- 
rocal to the right of protection, arising from 
the political relations between the Government 
and the citizen. 2 C. J. 1149-1150. 

The spirit in the citizen that, originating 
in love of country, results in obedience to its 
laws, the support of its defense and existence, 
rights, and 'institutions, and the promotion of 
its welfare, is called patriotism. Wise on 
Citizenship, p. 73. 



12 

This author, at page 68 of his work, says: 

The word allegiance is employed to express 
the obligation of fidelity and ol^edience due by 
the individual, as a citizen to his Government 
in return for the protection he receives from it. 

And, again: 

Fidelity is evidenced not only by obedience 
to the law^ of one's country, and lip-service, 
but by ^ H^' * calls lawfully made by the 
Government to bear arms or render other per- 
sonal service for the common defense and for 
the security of the lil^erties and the general 
welfare of his State. 

Obedience consists of respect for, observance 
of, and aid in maintaining the laws of the Gov- 
ernment . 

In the case of Miner v. Happersett, supra, the 
Chief Justice, on pages 165 and 166, says: 

The very idea of a political community such 
as a nation is, implies an association of persons 
for the promotion of their general welfare. 
Each one of these persons associated becomes 
a member of the nation formed by the associ- 
ation. He owes it allegiance and is entitled to 
its protection. Allegiance and protection, in 
this connection, are reciprocal obligations. 
The one is a compensation for the other; 
allegiance for protection and protection for 
allegiance. 

In Carlisle v. U. S., 16 Wall. 147, Mr. Justice 
Field, on page 154, said: 

By allegiance is meant the obligation of 
fidelity and ohedience which the individual owes 



13 

to the Government under which he Uves, or to 
his Sovereign, in return for the protection he 
receives. * * * The citizen or subject oit'^s 
an absolute and permanent allegiance to his Gov- 
ernment or Sovereign, or at least until by some 
open and distinct act he renounces it and 
becomes a citizen or subject of another Gov- 
ernment or another Sovereign. 

I close my reference to this phase of the subject in 
a quotation taken from one of Mr. Justice Miller's 
lectures on Constitutional law (Miller, Constitution 
of the United States, supra), at page 70: 

So, that it is evident that something more 
than a written constitution is essential to the 
safety and perpetuity of any government, and 
that is, a due reverence by the people for it 
and for their laws. All the instruments in 
the world, though they were written in letters 
of gold upon the most imperishable tablets, 
will be as ropes of sand if the people themselves 
have no respect for law or for those who 
administer it. 

A constitution, in the American sense of the 
word, is a written instrument by which the 
fundamental powers of the Government are 
estabhshed, limited, and defined, and by which 
these powers are distributed among several 
departments, for their more safe and useful 
exercise, /or the benefit of the body politic. 

It is thus made apparent that the relation between 
the citizen in his sole capacity as such, or in his dual 
capacity as citizen and officer with his Government, 
or in his capacity as a citizen and contractor with his 



14 

Go\^rnment is a trust relation, and a trust relation of 
the highest and most sacred character. 
The Government itself is a trust. 

A government ought to contain in itself 
every power requisite to the full accomplish- 
ment of the object committed to its care, 
and the complete execution of the trusts for 
which it is responsible; free from every other 
control but a regard to the public good and 
the service of the people. The Federalist, 
No. 31. 

Mr. Justice Baldwin, in his concurring opinion in 
the Charles River Bridge v. Warren Bridge, supra, at 
page 583g, said: 

The prerogative of the King is vested in 
him as necessary for the purpose of societ}^; 
it extends to all things not injurious to his 
subjects, but ''stretcheth not to the doing of 
any wrong'' (1 Bl. Com. 237-239); the ob- 
jects for which it is held and exercised are for 
the good of the subject, and the benefit of the 
Commonwealth, and not his private emolu- 
ment. It is a part of the common law (2 Inst. 
63, 496) ; confined to what the law allows, 
and is for the public good (Hob. 261) ; and the 
increase of the public treasure (Hard, 27; 
2 Vent. 268). The King is the universal oc- 
cupant of the public domain, which he may 
grant at pleasure (11 Co. 86 b; 9 Pet. 748; 
Cowp. 210); but his grants are voidable, if 
the}' are against the good of the people, 
their usual and settled liberties, or tend to 
their grievance (2) Pac. Abr. 149; Show. P. C. 
75) ; holding if for the eommon benefit as a trust 



15 

his prerogative is the guardiaiishi]) of public 
property, for the general interest of his sul) 
jects. 

Grover Cleveland tersely gave voice to a fundii 
mental truth when he observed — 

A public office is a public trust. 

The citizen, either as an ofhcer, Member of 
Congress, contractor, or builder, takes part in 
the administration of the Government of the 
United States. Justice ]\liller. 

All persons administering any of the affairs of 
Government, and all persons dealing with the Govern- 
ment, are trustees solely acting for the benefit and 
welfare of the people as a whole. 

Trusts are various, and defies a definite defini- 
tion that would apply to all trusts that arise. 

Such is the character of human language, that no 
word or sentence can convey to mind all situations, 
in one single definite idea. It would be impossible to 
completely define the trust that arises in the circum- 
stances under discussion, for this trust has an infinite 
origin and nothing infinite can be fully described by 
a finite definition. 

I make some references, however, to some defini- 
tions of a trust that in general a sense encompass the 
trust relation that here arises: 

The word ''trust" in its broadest sense 
embraces a multitude of relations, duties, and 
responsibilities. Thus an executor and admin- 
istrators, guardian of infants and lunatics, 
assignees in insolvency and bankruptcy. 



16 

bailees, factors, and agents, commission mer- 
chants, and conmion carriers, as well as the 
officers of private and public corporations, all 
exercise a kind of trust. Perry on Trusts and 
Trustees, 6th ed., vol. 1, sec. 1. 

A trust, in common parlance, may be said 
to be a confidence reposed by some one in 
some one, and for some public or private pur- 
pose. Ex parte Falk, 1 W. Va. 269, 298. 

Trusts are various ; a debtor may be said to 
be a trustee for his creditor, a bailee is cer- 
tainly one for his bailor and agent for his 
principal. Pickings v. Dwight, 4 S. C. 13, 4 
Rich. 360. 

A trust may exist without being expressed; 
it is deducible from the nature of the trans- 
action, as matters of interest, or superinduced 
upon the transaction by operation of law, as 
matters of equity independently of the par- 
ticular intention of the party. Russell v. Pey- 
ton, 4 111. Ap. 478. 

In McCreary v. Geinrmer, 103 Ga. 528, 534, a 

trust was thus defined : 

An equitable obligation, either expressed or 
implied, resting upon a person by reason of a 
confidence reposed in him, to apply or deal 
with property for the benefit of some other 
person, or for the benefit of himself and an- 
other or others, according to such confidence. 

So, it can hardly be regarded as at all doubtful 
that the Government itself, its officers, and all citizens 
dealing with it are in the performance of a trust. 
Congress in making an appropriation of public money 
for a governmental purpose is performing a trust. 



17 

The people having intrusted them with the appro- 
priation and expenditure of public money solely for 
the purpose of the benefit of the whole people, and 
all departments of Government, and all its officers, 
and all those dealing with the Government are held 
in conscience to strictest accountability for the faith- 
ful performance of this trust. 

Shealey, on the Law of Contracts, says, on page 6 : 

In substance, when one is dealing with the 

Government, he must consider himself the 

trustee and the Government the beneficiary 

under the trust. 

Mr. Chief Justice Fuller, in Hume v. U. S., 132 U. S. 

406, at page 414, says: 

In order to guard the public against losses 
and injuries arising from the fraud or mistake 
or rashness or indiscretion of their agents, the 
rule requires of all persons dealing with public 
officers, the duty of inquiry as to their power 
and authority to bind the Government; and 
persons so dealing must necessarily be held to 
a recognition of the fact that Government 
agents are bound to fairness and good faith 
as between themselves and their principal. 
Whiteside V. U. S., 93 U. S. 247, 257; U. S. 
V. Barloiv, 132 U. S. 271. 

All contracts for supplies should be made 
with those and with those only who ivill exe- 
cute them most faithfully and at the least ex- 
pense to the Government. Consideration as to 
the most efficient and economical mode of meet- 
ing the public's wants should alone control^ in 
this respect, the action of every department 

23189-22 3 



18 

of the Government. No other coiisideration 
can lawfully enter into the transaction, so far 
as the Government is concerned. Such is the 
• rule of pubUc poHcy, and whatever tends to 
introduce any other element in the transaction 
is against public policy. Tool Company v. 
Norris, 2 Wall. 45, 54, 55. 

This court has always regarded the Govern- 
ment as somewhat in the character of a ward, 
and its officers in the character of its guard- 
ians. * * * Whoever has business dealings 
with the trustee, a guardian, an executive, or 
officer of the Government, can sway them by 
no influence which will be prejudiced in the 
interest of the cestui que trust. Garman v. 
U. aS., 34 Ct. CL, 237, 242. 

The Supreme Court decided the cases of U. S. v. 
Carter, 217 U. S. 286, and Crocker v. U. S., 240 U. S. 
74, in favor of the Government upon the theory of 
a trust relation existing in transactions of govern- 
mental nature. 

A citizen when dealing with the Government can 
deal with it only through the officers of the Govern- 
ment, and, as hereinbefore asserted, the officer and 
citizen in so dealing are each acting in the capacity 
of trustees, the Government being the cestui que 
trust. 

The citizen deals with the officer with the knowl- 
edge of the officer's powers and limitations, and each 
knows that both are under obligation to deal justly, 
frankly, fully, and reasonably for the benefit of the 
cestui que trust. 



19 

The Constitution and laws define, to the knowl- 
edge of the contracting citizen, the extent and the 
limits of the officer's authority. The contracting 
citizen owes a duty and fidelity to the cestui que trust — 
his Government — by virtue of his allegiance. In addi- 
tion to the knowledge he in law possesses, of the 
limitations of the officer or officers with whom he is 
dealing. 

In U. S. V. Tingey. 5 Pet. 114, Mr. Justice Story, 
on page 127, said: 

Upon full consideration of this subject we 
are of the opinion that the United States 
have such a capacity to enter into contracts. 
It is, in our opinion, an incident to the general 
right of sovereignty; and the United States 
being a body politic, may, within the sphere 
of the constitutional powers confided to it and 
through the instrumentality of the proper 
department to which those powers are con- 
fided, enter into contracts not prohibited by law 
and appropriate to the just exercise of those 
powers. We have stated the general prin- 
ciple only without attempting to enumerate 
the limitation and exceptions which may 
arise from the distribution of powers in our 
Government or through operation of other 
provisions in our Constitution and law. 

The Supreme Court in the case of the Floyds 
Acceptance, 7 Wall. 667, 676, holds that the Gov- 
ernment speaks and acts ^^only through agents, 
more properly officers." It is further stated in this 
opinion that ^'we have no officers in this Govern- 
ment, from the President down to the most subor- 



20 

dinate agent, who does not hold office under the law, 
with prescribed duties and limited authority." 

All oflScers of the Government from the highest 

* to the lowest are but agents with delegated powers 

U. S. V. Maxwell Land Grant Co., 21 Fed. 19; Houser 

V. [/. S., 39 Ct. CI. 508; Cutler v. Kouns, 110 U. S. 

720. 

Officers of the Government must act within legally 
prescribed limitations. All dealing with Government 
agents charged with notice of limitations of officers^ 
Thompson v. U, S., 10 Ct. CI. 187. 

If in violation of his duty, an officer shall 
knowingly, or even corruptly, do an act inju- 
rious to the public, can it be considered 
obligatory f He can only bind the Govern- 
ment by acts which come within the just 
exercise of his official power. Hunter v. U. S.y 
5 Pet. 173, 188. 

Unauthorized acts of officers can not estop the 
Government for insisting upon their invalidity, 
however beneficial they ma}^ have proved to the 
United States. Filor v. U. S., 9 Wall. 45. 

The Government does not guarantee the integrity 
of its officers or the validity of their acts; they are 
but the servants of the law and if they depart from its 
requirements the Government is not bound. Mojitt 
V. U. aS., 112 U. S. 24, 31. 

Persons dealing with the officers of the Government 
are supposed to have a legal knowledge of the extent 
of their powers, and are bound by the legal effect of 
such knowledge. Sprague v. U. S,, 37 Ct. CI. 447. 



21 

It has long been settled that the action of 
executive officers in matters of accounting and 
payment can not be regarded as conclusive 
determination when brought in question in a 
court of justice. Wisconsin Cent. R. v. U. S., 
164 U. S' 190, 205; Steele v. C7. S., 113 U.S. 128, 
134. 

An officer's account with the United States 

Treasury is never in the legal or mercantile 

sense '^finally adjusted." Smith v. U. S., 14 

Ct. CI. 114. ^ 

The United States can bring action to recover back 

property obtained through its officers illegally or by 

mistake, or the value thereof. Where the transaction 

is illegal the defendant is chargeable with knowledge 

of the fact. Steele v. U. S., 113 U. S. 128, 134. 

The pertinent question which now presents itself 
for consideration is the validity of these contracts 
and many of their respective terms, and the acid test 
to apply, do these contracts and their provisions 
''come within a just exercise of official power f 

The first item to consider being do these contracts 
agree to pay more than ''a just compensation,'' as 
the Government is limited both by the Constitution 
and law to only pay for property and service a ''just 
compensation"; and this compensation must be a 
'^just compensation" not only to the contracting 
citizen, but to the public which pays the bill; and 
any contract or contractual provision that provides 
for any payment in excess of a ''just compensation" 
is void on two grounds: First, being violative of the 
duty of the officer to the knowledge of the contractor; 



09 



and, second, violative of the duty that the contract- 
ing citizen owes the Government by virtue of his 
allegiance. 

The fifth amendment to the Constitution of the 
United States provides that no ''private property 
shall be taken for public use without just compensa- 
tion." So, it does not make an}^ difference whether 
the Government acquires property by contract or 
by the exercise of its arbitrary power, in either in- 
stance all that it would be required to pay is a ''just 
compensation." The Government is but exercising 
its power — its governmental function — whether prop- 
erty is transferred and conveyed to it voluntarily 
or involuntarily by its citizens. The only limitation 
placed upon the Government is that it shall not ac- 
quire private property without paying "just com- 
pensation." This is a limitation both upon the 
Government and the citizen and each are regulated 
by it and confined to its limits. 

In Atlantic, etc., R. Co. v. Southern R. Co., 131 
Fed. 657, Judge Lurton, then a member of the 
Circuit Court of Appeals of the Sixth Circuit, on 
page 666 said, in a proceeding to compel an appro- 
priation: ''Nevertheless the proceeding to compel 
an appropriation is at least but a substitute for 
acquisition by contract." 

A proceeding by a city to acquire the 
property of a public utility is in the nature 
of a condemnation proceeding although de- 
nominated a purchase. Connor v. Kanawana, 
104 Wis. 471. 



23 



A proceeding to condemn is only to compel 
to sell. Atlantic, etc., R, Co. v. Southern R. 
Co., supra. 

The owner may become and is in fact made 
the involuntary vendor of his land under the 
exercise of the sovereign power. Marion v. 
Louisville R. Co., 90 Ky. 491. 

Condemnation proceedings are, until com- 
pensation is fixed and paid, or tendered, only 
in the nature of an executory contract to buy 
the land. Gosiner v. Southern R. Co., 7 
S. C. 173. 

The provisions of the Constitution are equally 
operative and binding in the ordinary and normal 
transaction of the Government as they are when 
the Government is compelled to resort to coercive 
means to accomplish its purpose. 

Turn to civil governments. Trace with 
me the simple march of circumstances. 
Society exists. Something is to be done, n( 
matter what, in its name and for its interest, 
a law has to be executed, some measure to b( 
adopted, a judgment to be pronounced. Now. 
certainly, there is a proper method of supply- 
ing these social wants; there is a proper lav 
to make, a proper measure to adopt, a propei 
judgment to pronounce. Whatever may be 
the matter in hand, whatever may be the 
interest in question, there is, upon ever}' 
occasion, a truth which must be discovered, 
and which ought to decide the matter, and 
govern the conduct to be adopted. 



24 

The first business of Government is to seek 
this truth, is to discover what is just, rea- 
sonable, and suitable to society. When this is 
found, it is proclaimed; the next business is to 
introduce it to the public mind; to get it ap- 
proved by the men upon whom it is to act ; to 
persuade them that it is reasonable. In all 
this is there anything coercive? Not at all. 
Suppose now that the truth which ought to 
decide upon the affair, no matter what; sup- 
pose, I say, that the truth being found and 
proclaimed, all understanding should be at once 
convinced; all wills at once determined; that 
all should acknowledge that the Government 
was right, and obey it spontaneously. There is 
nothing yet of compulsion, no occasion for the 
employment of force. Does it follow then that 
a government does not exist ? Is there nothing 
of government in all this ? To be sure there is, 
and it has accomplished its task. Compulsion 
appears not till the resistance of individuals 
calls for it — till the idea, the decision which 
authority has adopted, fails to obtain the ap- 
probation or the voluntary submission of all. 
Then the government employs force to make 
itself obeyed. This is a necessary consequence 
of human imperfection ; an imperfection which 
resides as well in power as in society. There is 
no way of entirely avoiding this; civil govern- 
ments will always be obliged to have recourse, 
to a certain degree, to compulsion. Still it is 
evident they are not made up of compulsion, 
because, whenever they can, they are glad to do 
without it, to the oreat blessing of all; and 



25 

their highest point of perfection is to be able to 
discard it, and to trust the means purely moral 
to their influence upon the understanding; so 
that, in proportion as government can dispense 
with compulsion and force, the more faithful it 
is to its true nature and the better it fulfills the 
purpose for which it is sent. This is not to 
shrink, this is not to give way, as people com- 
monly cry out; it is merely acting in a dif- 
ferent manner, in a manner much more general 
and powerful. Those Governments which em- 
ploy the most compulsion perform much less 
than those which scarcely ever have recourse to 
it. Government, by addressing itself to the 
understanding, by engaging the free will of its 
subjects, by acting by means purely intellec- 
tual, instead of contracting, expands and ele- 
vates itself; it is then that it accomplishes 
most, and attains to the grandest objects. On 
the contrary, it is when government is obliged 
to be constantly employing its physical arm 
that it becomes weak and restrained— that it 
does little, and does that little badly. 

The essence of government then by no 
means resides in compulsion, in the exercise of 
brute force; it consists more especially of a 
system of means and powers conceived for the 
purpose of discovering upon all occasions what 
is best to be done ; for the purpose of discover- 
ing the truth which by right ought to govern 
society, for the purpose of persuading all men 
to acknowledge this truth, to adopt and 
respect it willingly and freely. Guizot, His- 
tory of Civilization, vol. 1, p. 109 et seq. 



26 

The Supreme Court in referring to this ''just com- 
pensation^' in the constitutional provision, in Bmiman 
V. Ross, 167 U. S., at page 548, said: 

The "just compensation" fixed must be just 
not merely to the individual whose property is 
taken but to the pubHc who is to pay for it. 

And in Searle v. School District, 133 U. S. 533, at 
page 562, Mr. Chief Justice Fuller said: 

It is the duty of the State in the conduct of 
inquest by which the compensation is ascer- 
tained, to see that it is just, not merely to the 
individual whose property is taken, but to the 
public which is to pay for it. Harrison v. 
X Y., 21 Wall. 196, 204: Kohl v. U. S., 91 
U. S. 367, 371. 

Congress recognized this limitation when it gave 
authority to the Executive to purchase the necessar}^ 
instrumentalities, materials, and supphes for the 
recent war: 

(c) Whenever the United States shall cancel 
or modify any contract, make use of, assume, 
occup}' , requisition, or taken over any factoiy 
or part thereof, or any ships or war material, 
in accordance with the provisions of para- 
graph (b), it shall make just compensatio7i 
therefor, to l^e determined by the President, 
and if the amount thereof so determined by 
the President is unsatisfactory- to the person 
entitled to same, such person shall be paid 
seventy-five per centum of the amount so 
determined by the President and shall be enti- 
tled to sue the United States to recover such 
further sum as added to said seventv-five 



27 

per centum shall make up such amount as will 
be just compensation therefor, in the manner 
provided for by section twenty-four, para- 
graph twenty, and section one hundred and 
forty-five of the Judicial Code. (x\cts March 
4, 1917, c. 180, 39 Stat. 1192; July 1, 1918, c. 
114, 40 Stat.) 

Therefore it is plain that the officer acting for the 
Government ''can only bind the Government by acts 
which come within a just exercise of his official 
power,'' and he is limited in making payment for 
material and supplies to a ''just compensation." 

Under the decisions of the Supreme Court in Hume 
V. U. S., 132 U. S. 406; U. S. v. Barloiu, 132 U. S. 
271; U. S. V. Carter, 217 U. S. 286; Crocker v. U. S., 
240 U. S. 74; and Tool Company v. Norris, 2 Wall. 45, 
the compensation must be reasonable and fair, not 
only to the contractor furnishing the supplies, but 
to the public; compensation fixed in any such con- 
tracts in excess of that would be unjust and unrea- 
sonable to the public, and under the decisions above 
mentioned would be void and not binding on the 
Government, and this would be so, knowingly, in 
the law^, to the contractor, for the contractor would 
know that an officer of the Government could not 
bind his principal to any such excessive compensation ; 
and, further, it would be the duty in law arid in morals 
of the contractor to see that no officer of the Govermnent 
attempted to bind the Government to any agreement 
providing for the payment of unreasonable and 
unjust compensation; any contractor consenting to 



28 

receive any such unreasonable and unjust compen- 
sation would be acting dishonestly. A contract 
with the Government providing for more than a 
•''just compensation" to furnish it supplies would, 
under the circumstances, be a contract as charac- 
terized by Lord Hardwicke ''such as no man in his 
senses and not under delusion would make on the 
one hand, and as no honest and fair man would 
accept on the other. ^^ 

The duty of a citizen or an officer to the Govern- 
ment is measured only by the necessity of the occa- 
sion, and this necessity is the necessity of the Govern- 
ment. Advantage of the necessities of the Govern- 
ment can not be taken b}^ either officer or citizen; 
it is the duty of each to provide for and to supply the 
Government's needs, to the full extent of their 
ability, and if compensation is recjuired for such serv- 
ice or the furnishing of the necessary supply, it must 
be at its lowest possible price, and any agreement 
providing for the paying of anything in excess thereof 
is violative of the duty and ol)ligation of each, and 
is not binding on the Government. 

These contracts provide that the contractor shall 
manufacture the article contracted for "at the best 
price obtainable." This is the obligation of the con- 
tractor, imposed by law, and it was not necessary 
to affirmatively recite that fact in the contract, but 
by reciting it it simpJ^j emphasizes the contractor's 
duty. 

The contracts further provide that in addition to 
the "fixed profits" there shall be paid an amount 



29 

^'in consideration of .savings." This consideration 
is a fixed percentage of the savings made by the 
contractor between the estimated cost and the actual 
cost. When the Government gives to one of its citi- 
zens a contract to furnish material and supplies at its 
actual cost and for which the Government agrees to 
pay in addition to the cost a percentage thereof, as 
profit, then this contract itself, irrespective of the 
duty of the contractor as a citizen to the Government 
creates a trust relation. It reposes confidence in 
the contractor that he will perform the service so 
contracted for, at the lowest possible price, and it 
trusts him to do so. 

The contractor under such cost-plus contract, 
accepting this trust, is not entitled to any consider- 
ation for its faithful performance, therefore when he 
accepted the obligation to produce an article at cost^ 
with a percentage thereof as a ''fixed profit,'' he can 
not insist upon any additional payment for the per- 
formance of that duty, and any agreement to pa\ 
any additional sum for the faithful performance 
lacks consideration to support it, and is therefore 
void. 

The reason given and the contentions made to 
support the validity of the bonus provision in the 
contracts, when reduced to their last analysis, 
demonstrate an intent and purpose of paying a bribe 
to be honest. 

While it is not necessary to make any legal refer- 
ence to show that any such intent and purpose is 
fundamentally wrong, the case of Weave?' v. Whitney, 



decided by the chancellor in 1823, 1 Hopkins Ch. Rp. 
(N. Y.) 11, is pertinent, interesting, and instructive. 
,The chancellor held that an officer of the Navy 
could not bargain to discharge a public duty for a 
private reward any more than to omit such duty, nor 
by artifice create a surface appearance of the per- 
formance of a public duty and receive a private 
reward therefor. I take from the chancellor's opinion 
the following quotations, pages 21 and 22: 

The idea that an officer employed by the 
public for the performance of a public trust, 
and paid by his country for his services, may 
take additional and private compensation for 
the discharge of his official duties is wholly 
inadmissible. A distinction between bribes for 
doing a duty and bribes for violating a duty 
may exist in casuistry; and a bribe which has 
produced a violation of dut}^ iTiay, when viewed 
in connection with its effect, be more criminal 
than a bril)e not followed l^y such a result. 
But the idea now suggested, that bribes for 
doing a duty are lawful, is a conception which 
never yet found a place in any code of law or 
in any system of morals. Vain is the sugges- 
tion that private rewards like these are inno- 
cent incentives to duty. That he who must 
be corruptly bought to do his duty will per- 
form any duty with fidelit}^ is an idle supposi- 
tion. The necessary tendency of such re- 
wards is to debauch; and the faithful discharge 
of a public trust can not be expected from him 
who will accept a bribe to do his duty. The 
distinction between bribes to obtain the dis- 



31 

charge of a duty and bribes for other objects 
is far too subtle and fallacious for practice; a 
restraint too feeble, either for the suborner or 
for the officer accepting a bribe; a barrier too 
slight to secure fidelity and integrity in the 
discharge of public trusts. If these different 
cases of bribery involve different degrees of 
moral guilt, both are still crimes; and the 
sophistical pretense now advanced that an 
act criminal in itself becomes lawful when the 
intention of the parties committing the offense 
is to promote the due performance of the 
public service must be rejected. The argu- 
ment that private compensation might be 
justifiably received for the protection and the 
services stipulated by this contract, b'ecause 
these objects were matters of public duty, is 
in itself unsound, subversive of the clearest 
principles of law and morals, and inconsistent 
with the pure administration of public trusts. 
If the services engaged by this contract were 
within the scope of public dut}^, the}^ were to 
be performed as a public duty, which could 
not be bought or sold for private gain. 

In principle, there is no distinction in bribing an 
officer to do his duty and bribing a citizen to be 
honest in his dealings with his Government. 

It is contended that the provision providing for 
this bonus, or extra payment, can not be separated 
from the payment providing for the ^^ fixed profits^'; 
but an examination of the contracts w^ill show that it 
can be separated and is divisible from the ^^ fixed 
profits.^' 



32 

The contracts themselves provide that this pay- 
ment is made solely and only ^^in consideration of 
^vings/^ 

If the part of the contract to be performed 
by one party consists of several distinct and 
separate items, and the price to be paid by the 
other is apportioned to each item to be per- 
formed, or is left to be implied by law, such a 
contract is in general severable and the same 
rule holds where the price to be paid is clearly 
and distinctly apportioned to different parts 
of what is to be performed, though the latter 
is in its nature single and entire. Amsler v. 
Brunner et al, 173 111. App. 337; State ex rel. 
Dolman v. Dickey (Mo.), 231 S. W. 582, 13 
C. J. 563. 

But if there is any merit in the contention that the 
'^bonus" — the ^^amount for savings" — can not be 
separated from the ''fixed profit," then it follows 
that the two amounts must l^e added together as the 
compensation to be paid to the contractor for the 
construction and manufacture of the articles con- 
tracted for; and if such is the interpretation and 
construction of the contract, then the contract price 
is not only in excess of a "just compensation," but 
is unreasonable, inequitable, and unconscionable 
under the decisions of the Supreme Court above 
referred to, and is therefore void. And any officer 
3f the Government entering into any such engage- 
ment did not make a "just exercise" of his "official 
power," and therefore his act does not bind the 
Government. That the contractor under these cost- 



33 

plus contracts with their bonus provision did receive 
excessive profits the files and records plainly estab- 
lish ; and such being the facts, under the principle of 
law hereinbefore referred to, the Government may 
successfully institute a proceeding for the recovery of 
the excessive payments made. 

All of these contracts contain provisions attempt- 
ing to authorize the appointment of appraisers for 
the purpose of determining the values in certain 
instances on properties of the Government. These 
provisions of the contracts provide that the appraisers 
are to be appointed in the following manner: one 
to be selected by the Government, one by the con- 
tractor, and one by the two appraisers selected. 
There is no provision in the contract either author- 
izing or prohibiting a majority decision of the apprais- 
ers to control. Ordinarily speaking, a board of 
appraisers so constituted w^ould require unanimity 
of action, but there is an exception to this rule, and 
that exception applies to a matter in which the 
public is interested. The Supreme Court in Omaha 
V. Qmaha Water Co., 218 U. S. 180, 192-193, held 
where a board of appraisers was appointed in which 
the public was interested in their action and there 
was no provision that a majority w^ould control, a 
majority would control. 

I question whether this provision of the contract 
is good; first, because I know of no statute authoriz- 
ing an officer to appoint an appraiser to determine 
a matter that the law vests in his discretion. No 
officer of the Government has authority to enter 



34 

into a submission unless by statute so authorized 
and empowered (U. S. v. Aimes, 24 Fed. Cas. No. 
14,441; 1 Woodb. & M. 76). Second, under the 
provision for the appraisements a majority of the 
appraisers would control, therefore it would permit 
the fixing of a value on Government property by 
persons who might l)e interested adversely to the 
Government. 

It is apparent that this provision of the contracts 
is not to the interests of the Government, conse- 
quently I doubt its legal efhcacy. 

In concluding this memorandum, permit me to say 
that the narrow and selfish interests which control 
individuals and private corporations in their com- 
mercial transactions and intercourse is not the view- 
point from which, or the standard by which, trans- 
actions governmental in their nature are to be viewed 
or measured. It is in the degree that thought rises 
above the world's commercialism and its baneful 
influence that the aspirations and rights of a Govern- 
ment are realized, and the obligations and fidelity 
due it from its citizens and officers understood; and 
none of these rights are impaired or surrendered and 
no obligation is cancelled or made less binding when 
the Sovereign appears in the courts of the land to 
assert and enforce them. 

Respectfully suljmitted. 

Ralph E. Moody, 
Special Assistant to the Attorney General. 

O 



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